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Fragment on Capitalism and Free Enterprise

Is there a useful distinction between Capitalism and Free Enterprise? I am convinced that the answer to that is an emphatic yes; and that the distinction is vital to a proper understanding of the wreck of our political economy.

Free enterprise is characterized, above all, by a wide private field for business competition and innovation, operating under a structure of laws analogous to a good referee in a ball game. Savers, under free enterprise, extend their capital to the successful enterprisers in the community. The economy is not isolated — some of its magnates aspire to national or even world prominence — but its core is local or regional. Its health is the effective and trustworthy lending of the capital of the older folks of the community, who have savings, to the industrious and virtuous of the younger businessmen. The old generation earns a return on this lent capital; and the younger businessmen are able, when successful, to build and distribute new wealth.

There is definitely risk in the system, but it is risk faced primarily on a personal level. Risk is intimately linked to trust. The man of means wants to know the men he invests his capital in. He'll ask about their families. He'll do his homework, but often he’ll have to take his risks based on his gut sense about men.

The great seaports of New England in colonial and early Republican America are exemplars of the free enterprise system. It is manifest that remarkable risk was undertaken in the whaling trade, when ships and stores and whalers were out to sea for a year and more, or any of the other thousand seafaring enterprises the New Englanders developed to generate their wealth. It is manifest that the trade by which this wealth was generated was a global operation. But the core of the capital at back of it was anchored in the integrity and independence of the New England towns.

Not infrequently, free enterprise — especially when it expands to a national level — will feature some mercantilist elements. With mercantilism, the state intervenes to favor domestic manufactures and merchants as a matter of national interest or policy. The fortunes of the New England shipping towns were for decades subject to the whims of British imperial policies on exports and imports. There were some noteworthy examples in decade before the American Revolution of these towns adopting temporary mercantilist policies to protest and counteract British measures.

So free enterprise, we might say, is that system of political economy characterized by a broadly free private sector composed of business enterprises rising and falling on their own merits; and a limited state which intervenes only to preserve the rule of law, and occasionally to favor the merchants of the community.

I contrast this with the kind of political economy America has had for the past 30 years or so. (Its roots go farther back than that.) It makes good sense to call this Capitalism, I think. Its preoccupation is with capital, particularly of the sort that can be neatly packaged into securities and traded. In the past 30 years a decisive shift occurred, away from the local and human-sized model and toward an engineered world of abstraction. The shift came from private enterprise, but it was aided all along by the state. The referee was favoring one team: the financiers of globalization. The future of the American economy was hitched to a peculiar system of finance, which grew into a vast and stupefying infrastructure of debt that became the conduit by which capital from the most far-flung corner of the world flowed into US securities markets, above all those attached to real estate. Instead of personal connections, the basis of trust became and elaborate system of payments and hedges, all overseen (it was thought) by objective ratings agencies and alert regulators. Alas, it turns out that these are no effective substitute. There is, of course, no perfect system of social trust available to men here below; we have only approximations or approaches toward it. And it seems very clear now that the one used over the past couple decades has been a pretty poor approximation.

The crisis that exploded in our faces last fall was, in fact, a collapse of trust. The major actors in the financial system began to doubt the ability of their counterparties to meet obligations. Overnight repo markets froze. Creditors demanded damaging margin calls. Funds of all varieties faced mounting withdrawals from investors. Assets classes across the financial spectrum degraded in value.

Periodic crises of lesser severity have been a regular feature of financial markets. But as financial markets came to dominate the Western economies, these crises became increasingly perilous.

Capital was protected through most of this. The state’s interventions became more and more extensive, and increasingly made little distinction between domestic and foreign business. The state’s primary role became the stabilization of capital markets, which in practice worked out as a guarantee on sufficiently large-scale risk by financial firms. "Three decades of subsidized risk," CNBC’s Charles Gasparino calls it. Almost always, the financiers were rescued: Continental Illinois and the Resolution Trust Corporation in the 1980s; the "private" rescue of the geniuses at Long-Term Capital Management in 1998; the rise of shadow banking; the removal of the firewalls between deposits and exotic securities; the transformation of investment banks from private partnerships into public corporations. The tale is a long and intricate one. (Self-promotion alert: I'll have an essay in a forthcoming New Atlantis discussing some of it.)

The point here is that recent revelations shown us pretty dramatically that finance capitalism is not the same thing as free enterprise. The shift in focus from business enterprise to financial engineering, and from local and personal to global and abstract, marks the gradual transformation of American free enterprise into American capitalism.

Comments (26)

Everything you said is true. The interesting question is how it was able to develop. Those darned amoral liberatarians were the only ones that I know of who were hollering about it in the decades before it fell apart. Oh this imperfect world we live in.

There certainly would have still been a global financial system. But it would have looked a lot different -- mostly it would have been smaller and more cautious. Issuing enormous asset-backed bonds attached to US mortgages would been a far, far smaller business. The underwriters would have to assume all the risk that is right now assumed by the taxpayers; the buyers would demand far higher yield for the risk, driving prices down. It is doubtful that the allure of massive capital in equity offerings would be nearly as dramatic: therefore it is likely that many securities firms would have remained private partnership. And a private partnership is inherently more cautious than a public corporation with shareholder capital to burn.

In a word, the financial system would be under constant pressure from undeniable risk -- risk that would be harder to conceal. One of the main effects of the government support was to facilitate the illusion that risk could be reduced almost to a vanishing point.

Now, I don't for a moment mean to imply that this would solve all our economic problems. There were brutal crashes (often deflationary) in finance back when all the Gilded Age banks were private, when the system was much more cautious by nature. So I do not intent to suggest some panacea here.

Capitalism was once basically a description of how people would put resources into use in order to produce goods. Now, no doubt to the progressives' great glee and intention, it means something else. It would be more accurate to describe this system as corporatism.

But then, the definitions, especially when there are progressives involved in the debate, change faster than the arguments do.

The derivatives, securities, etc... These don't have much to do with actual business; they are responses to perverse incentives caused by governments. There is no free (although in this case perhaps the word natural will convey the meaning best) market for mortgage-backed securities.

They may have been. It would be hard to say. I've seen graphs claiming to precisely compare 19th century depressions to 20th century recessions (the terminology changed). I'm not sure what I think of statistical claims about historical eras that didn't keep statistics with the obsession we do.

I would say that crashes under free enterprise tend to be short and sharp, with rapid recoveries. Liquidation follows crisis and quickly becomes new growth. Crashes under capitalism tend to be prolonged by the power of existing capital to leverage the state for shelter.

Also, the bankers of the Gilded Age were by and large opposed to free enterprise. J. P. Morgan disliked competition and constantly intrigued to remove it. Indeed, I would say that, perhaps ironically, men of great baronial wealth tend not to favor free enterprise. Which is why another reason for suspicion of this age of corporate capitalism.

Human nature has not changed in the past two centuries; what has changed is the amount of power we have. Our power to exert and to attempt to exert control over the created world in ever more complex and wide-ranging ways has grown tremendously via the making and use of material and immaterial technologies.

If the development of such power and range of control is justified in practice, I have yet to see such a defense for our times.

I'd be cautious about over-emphasizing the extent to which "free enterprise" in the 18th and 19th centuries was more personal and less risky than "capitalism" in the late 20th. The London and (in the 19th century) New York exchanges were actually quite complex and traded in a number of types of derivates and securities, which routinely went through busts. People did routinely invest in ventures they didn't know much about -- which in part was of great advantage to the US, much of whose infrastructure expansion in the 1800s was financed by European investors eager to fund railways, canals, etc. in the New World (not just the US, but Canada, Argentina, etc.)

As you say, one major difference is that the government did not tend to step in and bail out investors when things went south (though governments could sometimes be persuaded to give monopolies or highly favorable trade regulation to try to help speculators out in their investments). However, I'm not sure that can so much be considered a change in the economic system as in the political one.

Finally, like Maximos, I get the sense that you tend to write about political economy with an almost aesetic sensibility, rather than one formed by cold hard facts. For example, what does it mean to say that the American economy has been characterized as follows:

"In the past 30 years a decisive shift occurred, away from the local and human-sized model and toward an engineered world of abstraction...The future of the American economy was hitched to a peculiar system of finance, which grew into a vast and stupefying infrastructure of debt that became the conduit by which capital from the most far-flung corner of the world flowed into US securities markets, above all those attached to real estate."

Do you mean to say that American companies involved in finance that grew over the past 30 years now employ more people than other types of firms? This is not true. Wal-Mart is the largest private-sector U.S. employer and in 2007 there were 2 banks in the top 20 private-sector employers in the U.S. Is there some other metric you have in mind? And why ignore the other most obvious revolution over the past 30 years -- the computer revolution which gave us Microsoft, Apple, IBM, HP, Google, etc.? All of these companies create stuff (whether computers or the software that runs them) and they employ millions who provide goods and services to the rest of us that help us flourish as people -- why ignore this story of "Capital" while focusing on just the real-estate bubble of the oughts?

Finally, one word about those New Englanders -- I just finished David Hackett Fisher's chapter on the Puritans in Albion's Seed. While it is true the Puritans really were industrious and welcomed innovation they also had an elaborate political economy (i.e. regulations) that governed everything from the prices merchants could charge to the amount of wealth someone could accumulate. These regulations were often honored in the breach, and over time the shipping towns you mention did much to erode their power (especially Boston) but even someone like me who loves free enterprise has to acknowledge that an economy can grow and succeed in providing goods and services under constraints that many of us who love free enterprise today would chafe under. Consider this my shout out to Maximos.

As for cold hard facts, how about the extraordinary growth of the finance arms of industrial corporations? Finding really worthwhile figures for this would be difficult, considering how much of what these shadow banks do is off-balance-sheet. But what happened in the case of AIG, and what nearly happened in the case of GE -- two veritable titans of American capitalism -- was that the growth and expansion of the finance arm turned these institutions, in effect, into huge hedge funds, which access to almost unimaginable capital, that featured big industrial companies as major side operations. GMAC is still taking bailouts; it began as the finance arm of a car company and transformed into a mortgage-heavy securities firm.

There is also the story of the transformation of Merrill Lynch, from a national brokerage with local branches everywhere -- the "thundering herd" of local brokers -- into a exotic securities shop heavily invested in various classes of mortgage debt.

Or how about the long tale of how the glamor of proprietary trading by quants with their invincible models swamped the more stable business of local and regional commercial banking -- taking despots and investing in enterprises -- so that by the end every big commercial bank was angling to get into the game of trading all the new finance products?

These are few of the facts that immediately come to mind when you question my statement about how "the future of the American economy was hitched to a peculiar system of finance."

Happy New Year to you to! I think you'll find the CRB essay important as the author argues that some of the changes in the world of finance (e.g. how big commercial banks evolved) had a lot to do with bad government policy and little to do with normal market forces.

But there is a more important point I was trying to make that I still don't think you address -- the question is not whether you can point to this or that example of exotic finance run amock. The question is what do you mean by an entire economy being "hitched" to a peculiar system of finance. I don't deny there are problems with our financial economy (although you and I continue to disagree about the source of those problems) but I DO DENY that these problems condemn the entire past 30 years of "Capitalism". Again, my point is that while we bailed out Continental Illinois and the S&Ls in the 80s (government intervention again, working its magic) -- Microsoft, Intel, Apple, etc. were growing like gangbusters and employing millions, helping increase productivity in energy, manufacturing and services -- all of which led to the infamous rising tide that the paleos are fond of pooh poohing. Our economic story is bigger than financial folly -- that is the point I'm trying to make and without comparative metrics, it is hard to evaluate your claims concerning the unique experience of the past 30 years.

The image of "hitched" is designed to convey the sense of being dragged in the train of some leading force. Finance engineering became the most prestigious and lucrative of fields. It was 30 years ago that Wall Street began the experiment of hiring the math specialists from academia. It was 30 years ago, at Salomon Brothers and First Boston, that the first mortgage-backed debt instruments were introduced to the bond markets. One could dig for the roots of this even farther back, I'm certain.

Jeff, I often feel like you are easily forgetting the culmination of all this: I mean the most dramatic and decisive steps toward socialism in several generations. Three or four whole industries have been absorbed into the state in the past couple years. The next generation's Microsoft or Apple will never be founded, precisely because Wall Street's speculations were so ruinous that we'll have to endure years of misallocated capital. Already a year is gone in which almost every good idea was throttled in the crib due to the dearth of risk capital and bank loans. We don't always get those opportunities back.

And yes, I do blame (in part) the finance capitalism that has dominated for some time now. I blame its promoters and admirers and all the welter of triumphalism that presented Globalization as the truest form of Capitalism. In truth it was mostly an imposture.

Its smartest operators had learned long ago that risk was underpriced because the state would intervene. And I think that until we get out heads on straight about the folly of this system, we're going to keep wasting our opportunities.

But Paul, when I said the state shouldn't, so as precisely not to continue to send this free lunch message, you and Zippy and several other people told me earnestly that the whole country would founder in riots and the downfall of everything, including possibly an unmitigated horror of a war with China, if the government didn't intervene, that we had to make those morally hazardous assumptions that Big Daddy would bail Risky Junior out of jail *come true* in order to avoid the downfall of the entire country.

Wouldn't it have been truer to capitalism to tell Junior to go pound sand? Do we really know that those incredibly bad outcomes would have happened? Not everyone agreed, you know. In fact, my recollection is that some people who are *free market advocates* were the very ones who didn't agree and who said in any event that we were only making worse trouble for ourselves by bailing everybody and his uncle out now and paying for it with more and more paper money. Yet somehow capitalism gets blamed for the bailout!

Predicting the consequences is probably an idle pastime, Lydia. It is enough (at least for me) to say that, in my understanding of the Federal Reserve Act, no Fed Chairman could have lawfully chosen to embrace the kind of uncertainty and disorder that would attend a gigantic global electronic bank run.

Many of the bailouts consisted of Federal Reserve actions. These come under the purview of the bank's status as a quasi-private institution. We might almost say that if our approach as a country to these crises were laissez faire, we wouldn't have a Federal Reserve. We certainly wouldn't have an FDIC.

Many of the bailouts, as financial maneuvers, have worked out pretty well. The TARP turns out to have been mostly a sideshow; the capital is steadily coming back. (It may yet morph into something more damaging as politicians put it to other purposes.) The Federal Reserve's various operations are winding down. They're done buying mortgage paper, and the extraordinary backstops of commercial paper and money markets are set to expire or have expired.

The major outstanding questions are:

(a) When the eventual showdown over inflation arrives, what's going to happen? There is a good chance the showdown will pit a Fed Chair anxious of the need to avoid inflation, against elected politicians content to let inflation do some of their taxation work for them. Who will prevail?

(b) Will America address the deep disorder in its system of finance capital? As I said to Maximos in another thread, I am dubious of the proposition that regulatory reform will correct this. It can help, but the problems are deeper than the levers of regulation can reach. Has America learned any lessons about economics, about the nature of property? The evidence is that Wall Street has learned nothing (or more likely has learned it and is now trading on it), but that is hardly unexpected.

What I think interesting is that to my eye many conservatives have learned some lessons. I've seen a number of mainstream publications (where our illustrious Mr. Jeff Singer would be right at home) endorsing the renewed skepticism of, say, the removal in the mid-1990s of the old firewall between retail and investment banking. That had been a deregulation project favored by Globalization enthusiasts, because it allowed American commercial banks to spread their risk-taking into the world of securities -- underwriting and innovating in that field.* It was a piece of that integration of global capital markets which is the essence of Globalization. So seeing center-right and conservative publications coming around on this suggests something hopeful to me. It suggests a recognition that it is true that Globalization is, as my friend Chris Floyd put it, "the delusion that human life can best be sustained at an inhuman scale."

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* It is noteworthy to me that one of the big rescue tricks that Treasury used in the crisis was to, as it were, reverse the flow: they let securities firms, the investment banks, become bank holding companies. In other words, they let them come under the shelter of the Federal Reserve umbrella. Access to the Fed funds and facilities was the main motivator, of course, but I find something poetic in this, that the sophisticated traders suddenly wanted to become stable old local banks when the going got tough. It would be like the literary set in New York suddenly looking to move to a small town in Kansas.

I appreciate your additional clarifications and refinements to your arguments. A couple of points in response:

1) I would once again recommend the CRB piece, as the author is NOT one who thinks the end of the firewall (Glass-Steagall) was a problem that should be isolated from other government regulatory problems:

What few commentators have questioned with any rigor is, why did banks become so heavily exposed to these housing risks [meaning MBS and CDO] in the first place...Banks owned these disastorous securities because, in large measure, the risks were rated AAA. Therefore, in the economy of both the bankers and their regulators, they did not have to hold much capital against the securities. AAA securities that yielded 30 to 40 basis points of net interest margin were attractive to banks only because the regulatory regime allowed enormous leverage on such highly rated securities. It was called "regulatory capital arbitrage," and it was a disastrous game, but it was a direct response to a regulatory environment where risk assessment was outsourced to the rating agencies...It was not a failure of regulation to detect or prevent excess leverage. Leverage grew in response to foolish regulations.

2) You worry about what "Capitalism" has given the American people: "Three or four whole industries have been absorbed into the state in the past couple years." And we will endure years of miallocated capital (who will fund the next Google?). Aside from the obvious question of what do you mean by "whole industries" (e.g. in the automobile industry Ford is still independent, foreign auto-makers continue to expand here in the U.S., etc.) I think these are valid concerns -- but without global capital flowing into the U.S. over the past 30 years could Microsoft and Silicon Valley have grown to where they are now? In other words, I worry that without globalization (i.e. international trade and investment) we'll miss out on many more opportunities than the opportunities lost right now thanks to the meddling of an overbearing Obama Administration and Democratic Congress.

3) Is globalization really "inhuman"? Aren't you the one who so eloquently reminded us of the risks and long distances involved in the whaling trade? How about all 17th century trans-Atlantic shipping and trade (including the slave trade)? Is trade with Southeast Asia in the era of jet travel and oil really that different than sending colonial rum to Britain?

Okay, Jeff: I've read the Keller essay in CRB. His burden is to throw cold water on the idea that more regulation is the answer. Fair enough. In another thread yesterday, I made essentially the same point to Maximos.

Keller does not address Glass-Steagall, which is the one piece of "re-regulation" I have endorsed. Presumably he would not favor it, though I'd like to hear why instead of trying to anticipate objections. To me it makes perfectly good sense, since we have an FDIC insuring deposits, to prevent those deposits from getting entangled in the great infrastructure of exotic securities. Here are two recent essays by conservatives arguing for a return to the retail bank-investment bank firewall:

Other than that, I don't have much to dispute in Keller's essay. This, for instance, is quite brilliant:

Treasury Secretary Timothy Geithner, for instance, has recently called for the creation of a "systemic risk regulator," an entity whose purpose would be to police those financial intermediaries deemed so large or integral that their failure would threaten the entire financial system. Good idea, perhaps, but the job description sounds very much like that of the Federal Reserve Bank of New York, whose mandate is to "foster the safety, soundness and vitality of our economic and financial systems." The head of the New York Fed while much of the recent trouble was brewing? Timothy Geithner.

The ratings agency problem is also a serious one. I mention it in my New Atlantis piece. Cheap money in the early 2000s is unquestionably an important piece of the puzzle. I would not be so quick to dismiss the influence of savings from Asia though. Anyway, it's a good article.

We might almost say that if our approach as a country to these crises were laissez faire, we wouldn't have a Federal Reserve. We certainly wouldn't have an FDIC.

Preach it, brother. But we have to crawl before we can walk and walk before we can run. And we aren't even crawling as far as I can see. That is, trying to wean America off of the drug of federal debt and never-ending depreciation of fiat money. Yes, you can kill the patient by going cold turkey. But is anyone even trying to get the U.S. into rehab? Nope. (And no, I'm _not_ talking about trying to get the economy working better in the short term.) We just bailed everybody out, vastly increased the federal deficit, and are going to let later generations pay for it in inflation. Yippee. I'm sorry, but to blame "capitalism" for this--I just don't get it. I blame _people_ for it. Sure, people are going to take advantage of the assumption of ever-increasing inflation to cover their crazy risks. That's why that assumption should be falsified rather than confirmed.

Doh! I missed your most recent comment while writing another one addressing many of the same things.

I believe I have answered (1): Basically I'd want to see Keller specifically address the issue. He does not in this essay.

(2) The "whole industries" are: real estate development, real estate finance, banking, shadow banking; those four at least are examples of where public capital was substituted for private capital to keep them afloat.

(3) Defining Globalization so broadly as "international trade and investment," will of course lay waste to my arguments. But it's a piece of sophistry, I'm afraid. Someone may as well say Socialism means "government intervention into the economy," and thereby establish with a flourish that America's wealth of the last century was generated by socialism.

To be a useful concept, I think, Globalization must refer to something more precise. My point about the 18th century Yankee seaports was that successful global trade and investment is quite possible without any thought of technologically-driven capital integration across borders and cultures.

No, what is inhuman is a financial system that allowed Iceland to become a hedge fund, and then an insolvent hedge fund, the failure of which detonated ruinous default events all over the world. What is inhuman is this infrastructure of engineered abstraction, this web of captured revenue streams and future payments converted into current value. And what's inhuman is that the only way all this hanky-panky could work is that government would, in a pinch, guarantee the infrastructure.

I plan to study this matter in greater depth, but the arguments against fiat currency generally (in my experience) tend to ignore the crashes and crises that America endure before the Federal Reserve and the abandonment of the gold standard. Our problems have tended to be inflationary; theirs, deflationary. What happens when the economy expands but the money supply does not keep pace? Specie becomes unnaturally scarce and dear, and debts gain in value. That is a brutal combination. It's at least arguable that inflation is a more endurable problem.

I agree with this: "But we have to crawl before we can walk and walk before we can run." I just think that "crawling" here consists in a moral and philosophical reform about the nature of property and political economy.

"What is inhuman is this infrastructure of engineered abstraction, this web of captured revenue streams and future payments converted into current value."

Are you serious? This is Investment 101 stuff -- we wouldn't have ANY financial products (e.g. stock) without such "engineered abstraction". My guess is you are referring to something somehow substantively different -- the question is then at what point does the substance of a financial product become "inhuman"?

I just think that "crawling" here consists in a moral and philosophical reform about the nature of property and political economy.

Paul, yes I think that's probably the ideal place to start the reform. I for one would not be adverse to seeing people take a big step back and revise how we understand corporations in general, and banks and insurance in general, and stock markets. And possibly do things like outlaw all forms of stock market trading on tomorrow's expectations/guesses for an already abstract entity, like selling stock short just for example.

Unfortunately, I would not trust the current band of bandits in charge to even begin such a thorough-going reform in an appropriate manner, much less ram it home. Nor would I have been much more inclined to trust the Republicans to do so in the last 6 years before the current admin. Nor do we see a wide-spread calling for such an overarching reform in the American public, which would be a pre-requisite to actually doing anything in that line successfully. So the only realistic prospect is continued tinkering, at various levels above the foundations and with varying levels of thoughtfulness. Just like always.

the question is then at what point does the substance of a financial product become "inhuman"?

Jeff, I have wondered that question as well. But not being sure exactly where to pin it does not mean being unsure that there are indeed inhuman forms of capital and risk organizing. In general, methods which collect risks at more and more levels of remove from the investor, and in ways designed to obscure the roots of the risk, seem pretty much guaranteed to foster an all too human (in the fallen sense) tendency to be irrational about the risk, to cover the eyes and jump, hoping to reach unreasonable profits and avoid a looming abyss. Given fallen human nature, we need to root out economic methods of organizing capital in reflection of that reality.

Jeff, of course I was not referring to basic equity and debt securities.

I have to say that it's a bit frustrating how your comments tend to give the impression that I have written about all this at the level of vague abstract theory, never touching on facts and details. "My guess is you are referring to something somehow substantively different." "I get the sense that you tend to write about political economy with an almost aesetic [did you mean aesthetic?] sensibility, rather than one formed by cold hard facts."

I don't think that is a fair appraisal of my posts on this subject. On the contrary, most of them build on the work of first-rate financial journalism: long, detailed reports from Bloomberg or the Financial Times on Harvard or Dubai, shadow banking or the derivatives trade. Have a look at these posts: http://www.whatswrongwiththeworld.net/usury_crisis/ -- I think you will find a considerable amount of factual support for my arguments in the links I provide.

I did mean "aesthetic" and I was thinking specifically about your comment concerning the American economy being "hitched to a peculiar system of finance" which you later clarify:

"The image of "hitched" is designed to convey the sense of being dragged in the train of some leading force. Finance engineering became the most prestigious and lucrative of fields."

This is the kind of statement my comment about cold hard facts is directed to -- what metrics are you using to suggest finance is a "leading force" (total employment? total growth? total profit or revenues?) and can you back up your claim that finance engineering became the "most prestigious and lucrative of fields"? As I have said before, is it really more prestigious to the average young man to go work for Google or to go work for Goldman Sachs? Is it really more lucrative at one or the other? What about all those Microsoft millionaires? Etc. I want more comparison and big picture data from your posts before I can evaluate your claims. For example, the McArdle piece I linked to really tried to wrestle with arguments made by all different sides in the "more regulation" / "less regulation" debate and was informative as a result. For example, McArdle is dismissive that Glass-Seagall was a problem because ultimately the commercial banks who wanted its repeal have fared well during our current crisis and it was the investment banks (and Fannie and Freddie and AIG) that got into trouble.

Regardless of my disagreements with your posts on the subject, I should say that I think they are always thought provoking and usually force me to at least poke around the internet for counter-arguments. So forgive me if I sometimes come across as arrogant as I'm just really trying to figure out what to do about the mess we are in just like everyone else.

I linked upthread to two articles with extensive discussions about Glass-Steagall.

Also, McArdle's thoughtful post that you linked to is from April 2008. "McArdle is dismissive that Glass-Seagall was a problem because ultimately the commercial banks who wanted its repeal have fared well during our current crisis and it was the investment banks (and Fannie and Freddie and AIG) that got into trouble."

This is simply outdated. Citigroup more than any other commercial bank wanted the repeal. This was Sandy Weill's grand project, the "financial supermarket." I believe portions of the major mergers that produced the massive Citi conglomerate were already accomplished before the repeal, meaning they were technically illegal.

But one thing is clear: Citigroup did not fare well during the current crisis. It is arguably the biggest basket case of them all. Bank of America is a mess as well.

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